In January 2010 Preqin carried out a survey of 50 institutional investors to determine current demand for managed accounts. Concurrently, Preqin surveyed 60 fund of hedge funds managers to ascertain the present supply of managed accounts in the hedge fund industry. The use of managed accounts is clearly becoming more mainstream, with 16% of investors surveyed currently using them to some degree within their portfolios and a further 23% considering an allocation in 2010. Greater transparency (41%), better liquidity terms (22%) and increased regulatory oversight (22%) were the three most common reasons stated by investors for adding managed accounts to their portfolios. 65% of fund of hedge funds managers surveyed are either currently running a managed account for their clients or considering doing so in the next 12 months.
As more and more hedge fund managers begin to offer this structure, and the range of managed account options available to investors continues to grow, we expect more institutions to add managed accounts to their hedge fund portfolios in future. Managed accounts are able to offer the increased liquidity and transparency that institutional investors demanded following the credit crisis; however the cost in terms of initial investment size as well as internal resources will always be prohibitive for some smaller institutional investors.
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